Because tomorrow is Tax Day, I was inspired to review the IRS Factors used to determine if a worker is an Independent Contractor or Employee. The IRS test is not as restrictive as California state agencies and courts. If you find yourself being audited by IRS and they are targeting you for misclassification of drivers, keep these factors in mind.
California is a hostile place for trucking companies that choose to classify drivers as Independent Contractors. Anyone who does work for compensation in California is presumed to be an employee. Therefore, the burden of proof falls upon the Trucking Company to prove that their drivers are Independent Contractors. While my practice focuses primarily on State agencies such as EDD, Labor Board, Workers Compensation Appeals Board and Civil lawsuits alleging misclassification, it is important to remember how the IRS determines whether someone is an employee or independent contractor. This is especially true because of the cooperative relationship and understanding that EDD has with the IRS: If EDD determines that you are misclassifying drivers, they will share their findings with the IRS and vice versa. Therefore, I think its worth talking about what the IRS looks for in determining whether a worker is an Employee or Independent Contractor. The IRS employs a 20 factor test to determine independent contractor status under the Internal Revenue Code. These factors generally relate to evidence of behavioral and financial control and the nature of the worker’s relationship with the employer.
The twenty factors are:
1. Whether the worker is required to follow the company’s instructions.
2. Whether the company provides training to the worker to accomplish the work.
3. Whether the worker’s services are integrated into the company’s regular business.
4. Whether the company requires that the worker perform the services personally, as opposed to assigning work to others.
5. Whether the company hires, supervises and pays the worker’s assistants.
6. Whether there is a continuing relationship between the company and the worker.
7. Whether the company sets the worker’s hours.
8. Whether the company requires the worker to work full-time.
9. Whether the worker works at the employer’s place of business.
10. Whether the company sets the order or sequence of the worker’s work.
11. Whether the worker is required to provide oral or written status reports to the company.
12. Whether the worker is paid by the hour, week or month, rather than upon completion of the project.
13. Whether the worker is reimbursed for business or travel expenses.
14. Whether the company provides the employer with tools and materials.
15. Whether the worker has made a significant investment in performing the services.
16. Whether the worker can realize a profit or loss.
17. Whether the worker works for more than one company at a time.
18. Whether the worker makes the services available to the general public.
19. Whether the company has the unilateral right to discharge the worker.
20. Whether the worker has the right to terminate the relationship without being liable under contract.
Call Transportation Attorneys so we can tell you what side of the Independent Contractor/Employee fence you will fall on if you get audited by the IRS!
We hope that once you utilize Transportation Attorneys to help you get your IC agreements and business model set up, you’ll enjoy many miles of trouble-free trucking. If you find yourself in trouble, you can turn to Transportationattorneys.net
to fight for you. We are one of the few law firms
that focuses on trucking, transportation and logistics with the knowledge and experience to competently guide you through these ever present hazards. We are very experienced in dealing with the distinctions between independent contractors and employees.